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Enbridge Energy Partners, L.P. Message Board

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  • nchuvakhin nchuvakhin Feb 9, 2006 9:08 PM Flag


    > I'm sure someone can explain how this company
    > can earn $.96/sh and pay out $3.70/sh. Can
    > anyone help with this?

    Let me try...

    Let's say you have a taxi cab that you just bought for $10,000 and plan to depreciate it over 10 years. When you buy it, your financial reporting does not show a $10,000 expense; it shows a $10,000 decrease in cash and a $10,000 increase in plant, property, and equipment. Your income statement is not affected, because purchase of capital equipment is not treated as a period expense.

    One year goes by, and you record your first depreciation expense in the amount of $1,000. However, this $1,000 is not a cash expense; it doesn't take anything out of your pocket. So, while your income takes a $1,000 hit, your cash flow doesn't.

    In case of EEP, in 2004 it had net income of $138 million and depreciation expense of $120 million, which was more than enough to pay $191 million in distributions to unit holders.

    For more details, refer to EEP's atatement of cash flows:

    (page F-6)

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